Take your mortgage to the grave, older borrowers told
Banks will move some interest-only borrowers to 'lifetime mortgages' that they will never repay, as hundreds of thousands face a shortfall
By Dan Hyde, Consumer Affairs Editor
10:00PM GMT 28 Oct 2014
Older home owners will be told to take mortgages for life or leave their homes under plans to tackle Britain's interest-only mortgage crisis.
Several major banks will propose "lifetime" contracts to borrowers in their 50s and 60s who face a shortfall when their mortgage ends, The Telegraph understands.
The lenders will allow customers to repay just the interest on their debts until they die, at which point the properties will be sold and a large chunk of the proceeds passed to the bank.
Around 130,00 interest-only mortgages are due to expire every year until 2020, with half facing a shortfall of £71,000 on average, according to the City watchdog. One in 10 borrowers have no repayment plan in place at all.
On Tuesday night Santander, the Spanish bank which bought Abbey and Alliance & Leicester, said it would offer lifetime mortgages from 2015.
Other "big-name" banks were in discussions about offering similar contracts to older borrowers who faced a mortgage "time bomb", industry sources said.
Ros Altmann, the Government's older people tsar, said: "If you have an interest-only mortgage it effectively means your bank owns your home, you don't, that's the reality.
"Lenders are trying to keep people in their homes, rather than repossess them, and these new deals will ensure the bank still owns most of the house when they die."
There are 2.8 million interest-only mortgages in Britain, industry figures show, many of which were issued during a sales boom in the late Eighties and early Nineties.
However, an estimated 1.3 million are sitting on a “time bomb”, the Financial Conduct Authority watchdog has warned, as they have little or no hope of repaying the debt.
More:
http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11194160/Take-your-mortgage-to-the-grave-older-borrowers-told.html